The Food Revolution Group Limited

FOD Details

Secured Investment from Strategic Investors: The Food Revolution Group Limited (ASX: FOD) is engaged in the production of food and beverage. The market capitalisation of the company as on 09 April 2021 stood at ~$33.13 million. As per a recent update, the company has announced that it was able to secure an investment of $3 million from two strategic global institutions via Evolution Capital Advisors Pty Ltd. The funding will rationalise through the issue of 85,714,287 new fully paid ordinary shares at an issue price of $0.035 per share.

H1FY21 Results Update: The company has reported decent financial performance during the period with an increase of ~24% in the total sales to $22.2 million, compared to the prior corresponding period. The juice sales were up by ~15% to $20.7 million, driven by the re-branding of Original Juice Co brand. The uplift in revenue was also driven by organic growth and an increase in retail prices across all major retailing customers for the Original Black Label and other juice products. The EBITDA stood at $2.2 million in H1FY21. Cash position of the company as of 31 December 2020 stood at $2.94 million.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company operates in a space where it must find suitable channel partners in order to successfully push its products to consumers and increase its sales. Any channel disruption might impact the business of the company.

Outlook: The company plans to use the proceeds from the latest funding to support the rollout of Juice Lab Wellness range and capital spend on the new cleanroom plant & equipment. It plans to be a leading provider of beverages, functional foods and wellness supplements.

Stock Recommendation: The company has reported an increase in traction in sales for its products, with the sale in Coles stores exceeding expectations after 4 weeks of availability. As per ASX, the stock of FOD is trading below its average 52-weeks’ levels of $0.025-$0.073. The stock of FOD gave a negative return of ~2.77% in the past one month and a negative return of ~7.89% in the past one week. On a technical analysis front, the stock of FOD has a support level of ~$0.025 and a resistance level of ~$0.044. On a TTM basis, the stock of FOD is trading at an EV/Sales multiple of 1.2x, lower than the industry average (Food & Tobacco) of 7.8x. Considering the current trading levels and the valuation on TTM basis, decent financial performance in H1FY21, increased demand for its products and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.035 as on April 09, 2021.

FOD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Angel Seafood Holdings Ltd

AS1 Details

Six Months Ended December FY20-S* Performance Update: Angel Seafood Holdings Ltd (ASX: AS1) markets and sells certified organic and sustainable oysters. The market capitalisation of the company as on 09 April 2021, stood at ~$22.62 million. During the given period under consideration, the company reported an increase of ~52% in revenues to $3.8 million, compared to the previous corresponding period. The oyster sales grew by ~55% to 5.1 million. The lower sales in restaurants due to the impact of the COVID-19 pandemic has been offset by growth in retail channels during the period. Sales were also aided by the growing consumer preference for healthy food products.

Six Months Ended December 2020 Financial Performance (Source: Company Reports)

Change in Substantial Shareholding: As per a recent update, the company’s shareholder IFM Independent Fund Management AG has ceased to be a substantial shareholder of the company after it disposed of 830,000 fully paid ordinary shares on 01 April 2021. 

Outlook: The company has announced that the Annual General Meeting of the company will be held on 28 May 2021. As per the company it has started 2021 season on a positive note with a resumption in oyster sales following the spawning season. The management has said that the FlipFarm project is tracking on budget and on schedule.

Key Risks: The company has to deal with the risk of inventory becoming obsolete and has to take steps in order to preserve the oysters.

Stock Recommendation: The company has reported a decent stock position of more than 29 million oysters on hand as of 31 December 2020. As per ASX, the stock of AS1 is trading below its average 52-weeks’ levels of $0.095-$0.275. The stock of AS1 gave a positive return of ~33.33% in the past one year and a negative return of ~6.66% in the past one month. On a technical analysis front, the stock of AS1 has a support level of ~$0.134 and a resistance level of ~$0.155. On a TTM basis, the stock of AS1 is trading at an EV/Sales multiple of 6.9x, lower than the industry average (Food & Tobacco) of 7.8x. Considering the current trading levels and the valuation on TTM basis, decent top-line performance, impressive stock of oysters and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.140 as on April 09, 2021.

*FY20-S relates to a transitional 6-month period, given financial year changing to 1 January to 31 December

AS1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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